In an exclusive interview recorded on August 3, 2019 and published for the first time on Global Americans, Pedro Ferreira (former head of Paraguay’s public utility ANDE) explains why he opposed the Bilateral Act that rocked Paraguay and resulted in his resignation and how Brazil stood to benefit.
[This transcript has been translated, trimmed, and lightly edited for continuity.]
First, especially keeping in mind that we want to inform many people who aren’t very familiar with this topic: What is ITAIPU Binational?
ITAIPU Binational Dam is the top producer of electricity in the world. The top producer of renewable electricity in the world. I believe it’s the top producer of energy (of any kind) in the world. In a record-setting year , it can produce 103,000 gigawatt hours of energy.
It has generated more energy than China’s hydroelectric dams [e.g., Three Gorges Dam] and any of the U.S.’s hydroelectric dams, like Grand Coulee. The company, rather entity, was created in 1973 when Paraguay and Brazil decided to form this binational entity to take advantage of the hydroelectric potential of the Paraná River when it had the waterfalls with the greatest flowrate in the world. They weren’t the highest falls, but the greatest flowrate in the world: the Guairá Falls.
We have had 45 years, almost 46 years, of use, with our neighbor [Brazil]. In this sense, both countries have a high responsibility to use the electricity and that this should bring value to the people even before the governments.
Following that thread: What does ITAIPU represent for Brazil? And what does ITAIPU represent for Paraguay?
Historically, ITAIPU has powered Brazil’s recent development. Because ITAIPU provided a quantity of energy that, if ITAIPU had not existed, Brazil would have had to generate via other, more expensive means. In that sense, it’s the country that has benefited the most. Paraguay, because of its smaller economy and lower level of development was not able to use its electricity. At the beginning, Paraguay used 1 to 2 percent of ITAIPU. Today, we’re close to 15 percent of the electricity.
For Paraguay, ITAIPU made economic growth possible. This you can see from the growth rates of Paraguay’s Gross Domestic Product (GDP) during the construction of the dam. There’s a period, from 1973 to 1981, where the GDP of Paraguay grew tremendously. But it grew because of construction, not based on the electricity. If you study the 1990s, when energy production commenced, the growth of Paraguay’s GDP was bad—a lost decade. Paraguay did not use its electricity because it wasn’t prepared to take advantage of the energy.
We don’t have massive industry. We don’t have a usage of energy that generates employment. But now we’re changing things.
The great value of ITAIPU is the energy. Brazil’s interest has always been the electricity. Paraguay’s focus has been on rent. But, under your administration in ANDE, there was a change in attitude… but [also] in projects that sought how to use more of the electricity. Could you tell us about those projects?
In 2017, before the current president Mario Abdo Benítez won the party primary, his team gathered a group of experts to establish a program for the government. After a lot of analysis, we said, “you shouldn’t rebuild something that’s already well-built.”
In 2016, the [previous] government had approved an energy policy plan that became our reference and this current government took it on as its own. Rather than starting from zero, there already existed an energy policy plan approved, by decree, by the previous government but which wasn’t being acted upon. We said, this is the policy we wanted to do. It’s on the website of the vice-ministry of mines and energy.
Obviously, the most important thing is the use of energy in order to develop industry and, via that, to generate decent employment opportunities. Its use in transportation, so that we might serve as an example to the world. Because we have enough electricity so that all the vehicles in the country could be electric. We wouldn’t need any other kind of energy.
These are the kinds of studies they did in 2014, 2015, 2016 that led to the energy policy that we took as our own. And we’re implementing it now. Or, we were implementing it.
Okay, now I want to get into the crisis that has made the news, not only in Paraguay or Brazil, but in the Spanish-speaking world and in English news, as well. What was the Bilateral Act signed by the ambassadors of Brazil and Paraguay on May 24, 2019 and what was your position on it?
It’s important to see the context first. Last year, just as every year, Eletrobras, which is ANDE’s counterpart on the Brazilian side and ANDE were not able to reach consensus on how each country was going to contract energy.
ITAIPU produces a large quantity of energy. The “guaranteed” energy is more expensive. [The majority of ITAIPU energy, which is divided 93/7 between Brazil and Paraguay] And it produces another quantity of [“additional” or “excess”] energy which is cheaper. From 2002, it was decided that the cheaper electricity would be divided 50/50 between Paraguay and Brazil. This “excess” energy is not described in the [ITAIPU] Treaty [Brazil-Paraguay, 1973].
They [Eletrobras] had to accept the contracts because we have various weighty arguments for why we should be able to purchase more of the cheaper electricity, rather than more of the expensive.
First, there’s a historical reason if we look at history, the past when Brazil consumed practically
all of ITAIPU energy in the 1990s for about 5 years, instead of paying 14 [i.e., $14/kilowatt month, the minimum amount necessary to service the debt and pay all obligations], they paid 10 at Brazil’s request [i.e., $10/kilowatt month, below the minimum necessary to service the debt and pay all obligations].
Anyone who knows about economic engineering or financial engineering knows that if you have a debt, you have to amortize it as planned; if you stop amortizing it, you generate a greater financial cost in the future. And so, today the cost of electrical energy in ITAIPU is, in a way, a consequence of Brazil not paying, in that decade, what it should have paid.
This is the historical reason; there’s also an argument to be made from benefits. At the end, this is an endeavor where the two countries ought to benefit mutually. Brazil, by consuming the greater quantity of energy, is the most benefited because it isn’t the energy that has value. What matters is what you do with the energy…
The Brazilian energy experts called a meeting about what would be the amount of energy contracted by ANDE. And for that reason, I sent a note to ITAIPU to say, very clearly, what would be the amount of energy contracted by ANDE. In previous years, there wasn’t agreement but there was acceptance of the amounts contracted by ANDE, sometimes under great protest by our counterpart [Eletrobras]. But there was acceptance of the amounts.
This provoked a great need to come to some kind of agreement. We negotiated in many meetings, many trips with Eletrobras, with ITAIPU in order to find a solution. Because we couldn’t be defeated in the technical arena, because of the technical arguments:
“Do you remember whose fault it is that the costs are so high? It’s your [Eletrobras’] fault. Don’t come to me to put your costs on me.” “Next, you received the majority of the benefit.” “And, thirdly, there’s already an agreement [established in 2007, expires in 2023].”
And so, in the technical arena, there was no way for them to defeat us. Therefore, what they did was request that the issue move to the diplomatic, foreign ministry level. And, obviously, at that level, the chancelleries began to treat issues beyond energy. There were other issues that might be beneficial to Paraguay, but they didn’t have to do with energy and, so, a lot of other interests were at play….
[Ferreira enumerates the ANDE proposal in great detail and finally gets to the point of greatest controversy, from his perspective.]
Item 6 [of our ANDE proposal] made it possible that Paraguay begin commercializing 300 megawatts directly in the Brazilian electricity market. It authorizes us so that we can open an international public tender to make 300 megawatts or three blocks of 300 megawatts available on the Brazilian electricity market.
The first block could, for example, be 100 megawatts 24 a day. The second block of 100 megawatts could come from the peak load and would have a lower price. And the third, if it’s not needed, they could return part of the energy to Paraguay and so Paraguay would benefit from this also.
To do this, Paraguay began a process to call for demonstrations of interest from anyone whether they be Paraguayan or Brazilian in order to have a transparent process, open until August 16. We would gather all the demonstrations of interest and analyze them via an international tender.
Our idea was that everything be transparent. This point created a lot of conflict. It created many problems for Paraguay.
A few days before May 24, maybe May 21 or 22 they asked me to summarize all that we’d been discussing. I sent a summary to the President of the republic to see what he wanted, but he didn’t return the WhatsApp message. And so, I sent a WhatsApp message to Hugo Saguier, our principal negotiator [Paraguay’s ambassador to Brazil]. He wanted that executive summary the night of May 23 ready for when he arrived in Brasilia. And so, I sent him a summary of all the points we’d been discussing in various meetings saying, “This is what we need to push for.” That is basically this document, which I can show I sent him on my cell. Because I knew that they’d probably need to ratify something with the chancellor, I sent the document to the president as well as the chancellor. At that time, a representative from the vice-presidency came to my office and he also received the information.
At ten o’clock the night of May 23, I received a message, forwarded from yet another person, instructing me to remove Item 6. It was too late to call the president or vice-president. Fortunately, I had an inauguration of a substation planned the following morning, early, with the
the president of the republic and in that act, I asked, “Is it certain, president?” The message clearly indicated that the vice president in accord with the other part, with the Brazilians—I don’t remember the text exactly. The instructions said that both the president and the vice-president were in agreement that we should remove Item 6.
And so, I asked President Mario Abdo, I asked him, because I showed him this. It was a colored version of this document that I showed him. And I said to him, do you remember what I sent late yesterday? They’re telling me that you want me to remove Item 6. And he said, “Item 6 is beneficial for Paraguay?” “Yes, president, it’s beneficial.” “Well, keep it.” And that’s what we did. We didn’t send a new message to the negotiators because we’d already sent the day before what would need to be treated in the negotiations. And we left it at that….
This generated a problem that’s now being investigated by the state’s attorney because it turns out that the person sent on behalf of the vice-presidency—now the vice-president is denying that the person was his employee, as opposed to what he [the vice-president] had always said and the understanding between us. [Editor’s note: The person sent is believed, from public records and previous comments, to be José Miguel “Joselo” Rodríguez González, a 27 year old lawyer who claimed he was the legal advisor to Paraguay’s vice-president and who claimed he was in legal representation of a Brazilian firm LEROS, connected to the Bolsonaro family.]
He [the vice-president] had clearly told me that everything that has to do with this issue, I want you to discuss it with this person. He had been presented to me as the Juridical-Legal Director of the vice-presidency of the republic. The vice-president said to me this lawyer, who is the son of a minister in the executive branch of this government. He [the lawyer] presented himself in all his messages, and not just to me, but to other people in ANDE, he presented himself as a representative of the vice-president. And so, in that character he was given all the information that had to do with this issue.
When, finally, they signed the act on the 24th, we [ANDE] didn’t get information about what was signed. In fact, they didn’t consult us. They only showed the ANDE representative these numerical values, they didn’t show any of the other approved items below. It was written on a little sheet of paper which the representative photographed and sent me via WhatsApp. We understood at that moment that this is what they had been negotiating.
Apart from presenting himself as the Juridical-Legal Director of the vice-presidency, he also presented himself as a representative of, spoke of a group [LEROS] that wanted to commercialize our energy [in Brazil]. He spoke as if that group was related to the family of the president of Brazil [i.e., Jair Bolsonaro].
What happens is that in all that comes after, it’s not just a problem with how he presents himself in meetings. First, they propose that they want to have the energy in an exclusive contract and that they’ll figure out the permissions [in Brazil].
And we said “No, we’re going to do a public tender.” Because if we didn’t, it’d be like shoving a Lava Jato into Paraguay. It’d introduce corruption. We’re not going to amputate a sovereign right belonging to Paraguay, we’re not going to give exclusivity. Why would we give it to a company for a certain price and not others who compete to be there?
“They come in representation of the presidential family of Brazil.” That’s how [the Paraguayan representative] writes it. And so, with that pressure, they continue to say that they want the exclusive rights to commercialize Paraguayan electricity. There’s a lot more, but they continue to insist on exclusivity. I write the following, because at that moment we’re presenting at the Expo (an annual industrial exposition where we present Paraguay) where we launch this energy sale to the world so that anyone who’s interested can come, learn, and compete for the bid.
And so, I tell them that this is an issue that we clarified earlier. And I made it clear that we would not discuss exclusivity again. They raised the issue again and this could stall everything. They wanted exclusivity. We did not. We wanted to put it as a Paraguayan right to auction the 300 megawatts and make an international call for interest, not as a something coming from the government of Brazil. Because, in that case, the neighboring country could eventually say “I’ll sell you the energy, but not to you.”
Why did you resign?
There’d been a lot of pressure put on Paraguay and ANDE and the president of the republic because of the problems being generated in other parts of the Paraguayan economy because I wouldn’t sign the agreement. At one point, I had suggested to the president of the republic that, if this situation were too difficult for him, to negotiate my head. To negotiate my head, but not to negotiate ANDE.
And so, they accepted the offer I’d made them, and said that the president of the republic asked that I resign. I took the closest sheet of blank paper that I could find and I wrote my resignation by hand.
Well, I want to close by returning to, not the crisis generated by the Bilateral Act, but rather opportunity specifically, the opportunity offered by ITAIPU for Paraguay and the opportunity via ANDE. And so, I want to focus not just on the pitfalls of documents and meetings but rather, what can ITAIPU do for Paraguay? What should ITAIPU do for Paraguay? [In addition] I want to ask if it’s possible to develop a Paraguayan brand based on products and industry made using renewable energy with ethical labor practices, keeping in mind the environment. What do you think about that possibility?
Would you allow me to dream? This past week [of crisis] has opened an opportunity. All of Paraguay has become aware that ITAIPU is a national cause. We received a massive education. A crisis makes it so that people think about different things, and I think it has opened, including, people outside the country.
And so, if you permit me to dream. Now, that we’ve drawn the attention of the world: Paraguay, if we had help from outside, could—even before Europe—be a country with zero emissions.
We could be an example of a small, middle income country that could have 100% clean energy. We could have energy security for our young people, for all the generations that come after us. We have enough energy to be able to say “Here, we will not burn any more fossil fuels, ever.”
If you’ll allow me to dream. And this transformation can happen quickly because Paraguay isn’t like other countries that have an energy deficit. We have the energy. Rather, we don’t have the capital to achieve this. Perhaps we’re not agile in decision-making; we have a lot of bureaucracy. But we can do this.
And if I dream about something, it’s that in 5 years I’d find that in Paraguay, a large part of its energy would be used in the industrial sector, creating products for the world which are completely green. Where no damage has been done to nature, where we’ve preserved all of our resources for the following generations.
And we can do this. What else can we do? That all transportation is electric, is zero emission. That we would use all our energy. That we would be the first country of our size where there are no fossil-fuel powered cars or no new fossil-fuel powered cars. And be an example for the rest of the world, as a small country. Because if you only take rich countries as examples, the rest of the world says “No, they achieved that because they’re rich, but we are poor.” Paraguay can be an example of a country where, if we have sufficient help, we can achieve it.
And we can preserve all of our bonuses for the next generation. Paraguay has three important bonuses. We have a demographic boom. You see here the young people, many young people, who are being educated for the world to come. We have the energy bonus: the country has clean, renewable energy resources. And we have a low tax burden. With these three elements, Paraguay and the world can come to agreement.
And so, Paraguay won’t need to depend so much on its neighbors. We’ve discovered in this crisis that there are a lot unclear, poorly organized relationships with our neighbors. And this has to stop. The issue of what we’re permitted to do, but which isn’t formally agreed upon, makes it so that one business person is allowed to do something and others are not. This isn’t good either for Paraguayans or for Brazilians or for Argentines.
The fact that some are allowed to do something and others are not isn’t good. We have to dismantle this whole scheme. We have to say that, of the 20 things that we do incorrectly, these 10 things we’re going to stop doing entirely, these 5 things we’re going to regularize and do them well, so that they aren’t pressure points. And in the case of the last 5, we know they’re going to be weak spots and we need to figure out how we’re going to mitigate the goal. In this way, we’ll be prepared to be able to sit—with a lot of moral authority— to negotiate with Brazil something that’ll be beneficial for both countries.
I’m going to close with two questions in one. How does it feel, based on what I’ve heard in the streets, the people consider you a patriot, a hero? And what comes next for you?
Paraguay has a history. We are a week and a half away from remembering key moments of the genocide committed against our country by Brazil. [War of the Triple Alliance, 1864-70] The battle of Acosta Ñu [between Brazil-Paraguay in which Paraguay’s troops were primarily children aged 8-12 and some elderly men, August 16, 1869]. And when they burned our hospital in Piribebuy with the patients still inside [August 12, 1869].
And so, we have a history of intense pain from 150 years ago.
And our grandparents reminded us of this and for that reason, with great patriotism, they fought the Chaco War [1932-35, Bolivia]. Where, in spite of great thirst, they were still determined. They had the moral fortitude to achieve all that they achieved in that confrontation. The young people today don’t have the same advantage I did to speak to my grandfather, who told me all that he’d suffered, how my two grandfathers had suffered in the war. But they didn’t falter, because they had that legacy of fighting until every single one perished.
And so, if this experience can serve as a historical legacy, can transfer to the young, I believe that this experience is going to give moral strength to our country. Other people don’t respect us because we don’t respect ourselves. For that reason, we don’t have the moral force necessary to not allow ourselves to be seduced by things that aren’t right in our country.
And with respect to the future I would prefer to not attain any benefit from this—but rather leave a legacy. People keep saying to me “Why don’t you run as a candidate for this or that?” No, because that’ll weaken the idea. I don’t need that in order to be happy. What you see here [in the university] is what makes me happiest. It’s my life.
To inspire young people, to serve as an example and also a warning that when young people do things incorrectly, they’ll know that they’ll be punished by a country that no longer tolerates hidden business dealings.
Paraguay doesn’t create obstacles for foreigners. In Paraguay, there are many honest people. Really, I don’t know if what I did was patriotism. I was honest. One needs to be honest, to be faithful to your principles and to your country. And there are many people in Paraguay who, because of the historical legacy, subscribe to this.
Here, the foreigner has the possibility to do things—maybe other places they put a thousand obstacles—but here they can do things. And because of what’s just happened in Paraguay, much more is possible.